TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Monday, December 18, 2017

The IRS Scandal, Day 1684: Fallout From Allegations Of Tea Party Targeting Hampers IRS Oversight Of Nonprofits

IRS Logo 2Washington Post, Fallout From Allegations of Tea Party Targeting Hamper IRS Oversight of Nonprofits:

Years of conservative attacks on the Internal Revenue Service have greatly diminished the ability of agency regulators to oversee political activity by charities and other nonprofits, documents and interviews show.

The fall in oversight, a byproduct of repeated cuts to the IRS budget, comes at a time when the number of charities is reaching a historic high and they are becoming more partisan and financially complex.

It represents a success for conservatives who have long sought to scale back the IRS and shrink the federal government. They capitalized on revelations in 2013 that IRS officials focused inappropriately on tea party and other conservative groups based on their names and policy positions, rather than on their political activity, in assessing their applications for tax-exempt status. Among conservatives, the episode has come to be known as the “IRS targeting scandal.”

Under the federal tax code, charities may not directly or indirectly support a political candidate, but they are allowed to participate in educational debates about the issues. Other nonprofits known as social welfare groups may be involved in politics, but only as long as it is not their primary purpose.

The main part of government tasked with policing those lines, the IRS’s Exempt Organizations division, has seen its budget decline from a peak of $102 million in 2011 to $82 million last year. At the same time, division employees have fallen from 889 to 642.

The division now lacks expertise, resources and the will needed to effectively oversee more than 1.2 million charities and tens of thousands of social welfare groups, according to interviews with two dozen nonprofit specialists and current and former IRS officials.

“This completely neutered them,” said Philip Hackney, a tax law professor at Louisiana State University and former Exempt Organizations lawyer at the IRS. “The will is totally gone.” ...

Conservatives have likened the IRS’s extra scrutiny of the tea party groups to Watergate and called it a political witch hunt. Among the leading critics was Cleta Mitchell, a veteran Republican activist and nonprofit lawyer. In 2014, she told a House oversight panel that Congress ought to abolish the IRS, saying the agency “is so corrupt and so rotten to the core that it cannot be salvaged.”

But while investigations by Congress and federal agencies found that IRS officials selected tea party groups for added attention, the investigators concluded there was no proof of political intent, a liberal conspiracy or White House involvement. ...

More charities have now begun to recognize they face little chance of an examination or sanction, which can involve terminating a group’s tax-exempt status and the ability of its donors to deduct their contributions, specialists said. “More and more groups are going to discover that they get away with doing politics,” said Lloyd Hitoshi Mayer, a law professor at Notre Dame and a former nonprofit lawyer. ...

In interviews and an email exchange with The Post, Mitchell said the investigations failed to highlight the essence of IRS wrongdoing. She maintains the scandal was grounded in abusive, politically motivated targeting, as chronicled by the Issa report in 2014. “I have no intention of ‘schooling’ anyone on why the IRS / Obama / Democrats’ narrative is wrong,” she wrote. “I’m not going to get into an argument to try to convince you of why that narrative is wrong. It just is. You either believe it or you don’t and if you don’t think there was a Political targeting scandal, then you don’t need to talk to me.”

Miriam Galston, a law professor at George Washington University, said there’s growing evidence that many charities are “flagrantly violating” the expectation that they contribute to “the public good.” She said IRS regulators are not in a position to do anything about it. “They’ve been burned. They’ve been hammered. They’ve been bludgeoned,” said Galston, a specialist in state and federal nonprofit law. “They’re trying to survive.”

http://taxprof.typepad.com/taxprof_blog/2017/12/the-irs-scandal-day-1684-fallout-from-allegations-of-tea-party-targeting-hampers-irs-oversight-of-no.html

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Comments

"But while investigations by Congress and federal agencies found that IRS officials selected tea party groups for added attention, the investigators concluded there was no proof of political intent, a liberal conspiracy or White House involvement. ..."

Really? An organization is singled out by the IRS for extra scrutiny based on the political beliefs implied by its name and it was done without political intent by the IRS? What a load of nonsense.

Simply put, whatever ramifications there are to the budget, the IRS did this to itself by its underhanded disclosure (a planted question at a panel discussion) and years of stonewalling thereafter to avoid coming clean.

Posted by: Carey Gage | Dec 18, 2017 8:17:06 AM

Poor Babies!

Posted by: SDN | Dec 18, 2017 8:25:45 AM

Conservative political groups were singled out, but there was no political intent in doing that? I feel like I'm on lithium.

Posted by: Mike Sigman | Dec 18, 2017 8:30:58 AM

Considering what they did to Tea Party conservatives, I cannot sympathize.

If they have lost their will to continue and accomplish anything, maybe we should fire 642 more employees and save $82 million a year.

Posted by: David H Dennis | Dec 18, 2017 8:40:35 AM

How come there was not one IRS whistleblower? These loyal employees who are not supposed to go after the tax payers, for political reasons, sat by and watched as the IRS was used, by the Obama Administration, to silence the Tea Party. Of course they did that with the help of Republicans, like John McCain, who wanted to make sure there were no more "wackobirds" in the House or the Senate.

Posted by: bflat879 | Dec 18, 2017 9:41:46 AM

The price of stonewalling.

Posted by: ruralcounsel | Dec 18, 2017 10:40:10 AM

When I hear numerous leftist charities complaining about excessive IRS attention, then I will believe the narrative about the IRS picking on only the Tea Party for partisan reasons is wrong, but not before.

Posted by: richard40 | Dec 19, 2017 8:39:55 AM

"The will is totally gone."

Jesus.

I have a suggestion. How about some of you arrogant SOBs at the IRS take a step back, check your egos at the door, and maybe try doing a day's work for a day's pay? That always seemed to motivate ME.

Or has your drop in power so demoralized you; has the loss of the ability to feed your swollen egos every day by tormenting some poor slob whose politics you don't like, has that really and truly sapped your 'will'?

What's the matter, IRS? More like a job and not so much like fun anymore? If you don't like your job anymore, give it to me, damn you. I've been out of work for six months, mainly because of the actions of incompetent boobs with more money than good sense and judgement.

There are a lot of guys like me who would be happy to have a guaranteed workday and a paycheck. Arrogant fools. One wonders if you even care how ridiculous you look to the average man.

Posted by: Steven Satak | Dec 19, 2017 5:04:29 PM